Saturday, October 21, 2017
Congressional Chief of Staff Charged With Filing False Security Clearance Form, Imprisoned for Failure to File Taxes
A congressional staffer was charged with filing a false security clearance form, announced Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division, U.S. Attorney Jessie K. Liu for the District of Columbia and Assistant Director in Charge Andrew Vale of the FBI’s Washington Field Office. He was previously sentenced to prison for willfully failing to file an individual income tax return.
According to the indictment, Issac Lanier Avant, a resident of Arlington, Virginia, was a staff member employed by the House of Representatives since approximately 2000. Since 2002, Avant has been the Chief of Staff for a member of Congress. In approximately December 2006, he began an additional position for the House Committee on Homeland Security, including Deputy Staff Director and Staff Director. The indictment charges that from 2008 through 2012, Avant earned wages of approximately $170,000 and failed to file an individual income tax return with the Internal Revenue Service (IRS) during those years. Avant allegedly had no federal income withheld during those years because in May 2005, he caused a form to be filed with his employer that falsely claimed he was exempt from federal income taxes. According to the indictment, Avant did not have any federal tax withheld from his paycheck until the IRS mandated that his employer begin withholding in January 2013.
In 2008 and again in 2013, for his position with the Committee on Homeland Security, Avant allegedly completed a Standard Form 86, “Questionnaire for National Security Positions” (SF-86), in order to receive a Top Secret security clearance. The indictment charges that on Sept. 18, 2013, Avant willfully made a false statement by responding “no” to the following question on a SF-86: “In the past seven (7) years have you failed to file or pay federal, state, or other taxes when required by law or ordinance?”
Despite earning more than $165,000, Avant failed to timely file his 2009 through 2013 individual income tax returns, causing a tax loss of $153,522. Avant had no federal income withheld during those years because in May 2005, he caused a form to be filed with his employer that falsely claimed he was exempt from federal income taxes. Avant did not have any federal tax withheld from his paycheck until the Internal Revenue Service (IRS) mandated that his employer begin withholding in January 2013. Avant did not file tax returns until after he was interviewed by federal agents.
The court imposed a prison term of approximately 4 months, consisting of 30 days incarceration, followed by incarceration every weekend for 12 months. Avant was also ordered to serve a one-year term of supervised release and to pay restitution in the amount of $149,962 to the IRS.
If convicted, Avant faces a statutory maximum prison term of five years, as well as a term of supervised release and monetary penalties.
Saturday, October 14, 2017
This document is now available on SOI’s Tax Stats Web page and contains the Federal tax forms, schedules, and information documents selected for SOI's Tax Year 2016 studies. It is organized in the following two parts:
- Individual and Tax Exempt studies include data related to the Form 1040 Individual Income Tax Return series, as well as data on sales of capital assets and an extensive program that connects income tax returns with information documents filed by third parties. The studies also include data collected for estate and gift taxes, tax-exempt organizations, and tax-exempt bonds.
- Corporation, Partnership, and International studies focus on data collected from the Form 1120 series, SOI’s partnership program, as well as information collected from international filers.
SOI works in collaboration with data users both inside and outside of the Federal Government to develop the information collected for each SOI study. SOI bases most of its programs on stratified samples of returns for which data are collected prior to IRS audits; therefore, the data represent information as originally reported by taxpayers. Each tax form included in the SOI program is represented in this volume. The specific data items captured for each study are indicated on facsimiles of the forms and schedules. Data from certain forms and schedules are collected periodically, rather than annually. For this reason, the contents of this document will vary somewhat from year to year.
Friday, October 13, 2017
This report looks at the impact on the shadow economy of changes in ways of working and business models, the growth of the digital economy and the emergence of new technologies. While these are causing some new shadow economy activities to emerge and some existing ones to expand in scale or scope, they are also providing tax administrations with new opportunities and tools to enhance compliance. The report sets out a number of examples of effective actions being taken by tax administrations utilising technology, behavioural insights and new sources of data. It also recommends a number of areas for further targeted work to help improve tax administrations’ ability to tackle shadow economy activity, including for collaborative work on the sharing and gig economy. Download Shining-light-on-the-shadow-economy-opportunities-and-threats
Wednesday, October 11, 2017
This report provides an overview of some of the technology tools that tax authorities have implemented to address tax evasion and tax fraud, focusing on electronic sales suppression and false invoicing. The report also includes a more technical catalog of these technology solutions, with a view to encouraging other tax authorities that are facing the same types of risks to draw on that experience. The report also discusses complementary work that tax authorities are undertaking to address the cash economy and sharing economy, which, although not types of tax evasion and fraud themselves, can facilitate it. Download Technology-tools-to-tackle-tax-evasion-and-tax-fraud
Thursday, October 5, 2017
FATCA Regulations To be Reviewed By Treasury for Potential Revocation? Along with 200 Other Regulations...
This Second Report recommends actions to eliminate, and in other cases mitigate, consistent with law, the burdens imposed on taxpayers by eight regulations that the Department of the Treasury (Treasury) has identified for review under Executive Order 13789.
Treasury is committed to reducing complexity and lessening the burden of tax regulations. In response to Executive Order 13789, Treasury’s Office of Tax Policy completed a comprehensive review of all tax regulations issued in 2016 and January 2017. The June 22 Report identified eight proposed, temporary, or final regulations for withdrawal, revocation, or modification. Treasury continues to analyze all recently issued significant regulations and is considering possible reforms of several recent regulations not identified in the June 22 Report. These include regulations under Section 871(m), relating to payments treated as U.S. source dividends, and the Foreign Account Tax Compliance Act.
Included in the review are longstanding temporary or proposed regulations that have not expired or been finalized. As part of the process coordinated by the Treasury Regulatory Reform Task Force, the IRS Office of Chief Counsel has already identified over 200 regulations for potential revocation, most of which have been outstanding for many years.
Treasury and the IRS expect to begin the rulemaking process for revoking these regulations in the fourth quarter of 2017. Treasury and the IRS are also seeking to streamline rules where possible. Later reports and guidance will provide details on the regulations identified for possible action, the reasons that they may be revoked, and the manner in which revocation would occur.
- Download Treasury Revocation of Regs 2017
- Current Status of FATCA an CRS (Sept 2017 edition) https://ssrn.com/abstract=3045459
Actions Taken on Current Regs of June Report?
Final Regulations under Section 7602 on the Participation of a Person Described in Section 6103(n) in a Summons Interview (T.D. 9778; 81 F.R. 45409)
These final regulations provide that the IRS may use private contractors to assist the IRS in auditing taxpayers. Under the regulations, the IRS may contract with persons who are not government employees, and those private contractors may “participate fully” in the IRS’s interview of taxpayers or other witnesses summoned to provide testimony during an examination. In particular, the regulations allow private contractors to receive and review records produced in response to a summons, be present during interviews of witnesses, and question witnesses under oath, under the guidance of an IRS officer or employee. These regulations were issued as temporary regulations in 2014 and were finalized in 2016. Although only two comments were submitted during the public comment period, these regulations have since attracted public attention and criticism. In particular, the IRS’s ability to hire outside attorneys as contractors and have them question witnesses during a summons interview has raised concerns. After the IRS hired an outside law firm to assist with the audit of a corporate taxpayer, a federal court found that the “idea that the IRS can ‘farm out’ legal assistance to a private law firm is by no means established by prior practice” and noted that it “may lead to further scrutiny by Congress.”4 While the court determined, based on the statute, that the IRS had the legal authority to enlist the outside attorneys, the court was “troubled by [the law firm’s] level of involvement in this audit.”5 The Senate Finance Committee subsequently approved legislation that would prohibit the IRS from using any private contractors for any purpose in summons proceedings. This legislation has not been enacted into law.
After reviewing and considering the foregoing concerns and the public comments received, Treasury and the IRS are looking into proposing a prospectively effective amendment to
these regulations in order to narrow their scope by prohibiting the IRS from enlisting outside attorneys to participate in an examination, including a summons interview. Under the amendment currently contemplated by Treasury and the IRS, outside attorneys would not be permitted to question witnesses on behalf of the IRS, nor would they be permitted to play a behind-the-scenes role, such as by reviewing summoned records or consulting on IRS legal strategy.
When the IRS enlists outside attorneys to perform the investigative functions ordinarily IRS investigators wield significant power to question witnesses under oath, to receive and
review books and records, and to make discretionary strategic judgments during an audit— with potentially serious consequences for the taxpayer. The current regulation requires the
IRS to retain authority over important decisions, but the risk of a private attorney taking practical control may simply be too great. These powers should be exercised solely by government employees committed to serve the public interest, not by outside attorneys.
These concerns outweigh any countervailing need for the IRS to contract with outside attorneys. Treasury remains confident that the core functions of questioning witnesses and conducting investigations are well within the expertise and ability of the IRS’s dedicated attorneys and examination agents. Although Treasury and the IRS are currently considering proposing an amendment to the regulations so that outside lawyers would no longer be allowed to participate in an examination, Treasury and the IRS currently intend that the regulations would continue to allow outside subject-matter experts to participate in summons proceedings. In certain highly complex examinations, effective tax administration may require the specialized knowledge of an economist, an engineer, a foreign attorney who is a specialist in foreign law, or other subject-matter experts. In some cases, there is a compelling need to look outside the IRS for expertise that the IRS’s own employees lack. Because experts have a circumscribed role in providing subject-matter knowledge, outside experts do not pose the same risks as outside attorneys. Outside experts should thus continue to be permitted to assist IRS by reviewing summoned materials and, if necessary, by posing questions to witnesses under the guidance and in the presence of IRS employees. Such a role would be limited to the small subset of cases in which the IRS requires the assistance of a subject-matter expert to ensure effective tax administration.
Regulations under Section 707 and Section 752 on Treatment of Partnership Liabilities (T.D. 9788; 81 F.R. 69282)
These partnership tax regulations include: (i) proposed and temporary regulations governing how liabilities are allocated for purposes of disguised sale treatment; and (ii) proposed and temporary regulations for determining whether so-called bottom-dollar” guarantees create the economic risk of loss necessary to be taken into account as a recourse liability. Treasury and the IRS, therefore, are considering whether the proposed and temporary regulations relating to disguised sales should be revoked and the prior regulations reinstated. By contrast, Treasury and the IRS currently believe that the second set of regulations relating to bottom-dollar guarantees should be retained.
Final and Temporary Regulations under Section 385 on the Treatment of Certain Interests in Corporations as Stock or Indebtedness (T.D. 9790; 81 F.R. 72858)
These final and temporary regulations address the classification of related-party debt as debt or equity for U.S. federal income tax purposes. Treasury received a very large number of comments on the Section 385 regulations. Many supported the regulations, while others were critical. Shortly after issuing the June 22 Report, Treasury and the IRS announced in Notice 2017-36 that application of the documentation rules would be delayed until 2019. After further study of the documentation regulations, Treasury and the IRS are considering a proposal to revoke the documentation regulations as issued.
Distribution regulations retained pending enactment of tax reform. The distribution regulations address inversions and takeovers of U.S. corporations by limiting the ability of corporations to generate additional interest deductions without new investment in the United States.
Final Regulations under Section 367 on the Treatment of Certain Transfers of Property to Foreign Corporations (T.D. 9803; 81 F.R. 91012)
After considering the comments and studying further the legal and policy issues, Treasury and the IRS have concluded that an exception to the current regulations may be justified by both the structure of the statute and its legislative history. Thus, to address taxpayers’ concerns about the breadth of the regulations, the Office of Tax Policy and IRS are actively working to develop a proposal that would expand the scope of the active trade or business exception described above to include relief for outbound transfers of foreign goodwill and
going-concern value attributable to a foreign branch under circumstances with limited potential for abuse and administrative difficulties, including those involving valuation. Treasury and the IRS currently expect to propose regulations providing such an exception in the near term.
Please download my new analysis of the impact of FATCA and CRS: https://ssrn.com/abstract=3045459
Tuesday, September 12, 2017
At the 35th Cambridge Economic Crimes Symposium attended by over 1,750 delegates from over 100 countries, on Friday September 8, 2017, Professor William Byrnes (Texas A&M) analyzed the issues and challenges of "Disclosing Wealth". His slides and his paper are available for download:
Professor Byrnes addressed the findings of Robert Barrington's Transparency International in the context of how some low score governments, a majority of the index, are leveraging financial and tax information to investigate (and silence) political opposition and promote criminal acts against citizens. Professor Byrnes provided a path way forward for what the high score governments can do to assess the low score countries and address the misuse of information.
"I was overwhelmed by the positive response from both industry and government attendees," said William Byrnes. "I am already in contact with several attendees about potential mitigation of the challenges that were discussed and presented in my essay".
Other plenary panelists by example included -
• Mr Robert Barrington, Executive Director, Transparency International UK
• Mr Howard Sharp QC, former HM Solicitor General of the States of Jersey
• Mr Barnaby Pace, Senior Campaigner, Governments and Corruption, Global Witness, UK
• Ms Polly Greenberg, Managing Director, Financial Crime and Regulatory Consulting, Duff & Phelps, LLC and former Chief, Major Crimes Bureau, New York County District Attorney’s Office, USA
• Professor David Chaikin, Associate Professor of Law, University of Sydney Business School, Barrister, and formerly of the Australian Federal Attorney-General’s Department and the Commonwealth Secretariat
• Professor Rose-Marie Antoine, Dean, Faculty of Law, University of the West Indies, St Augustine, Trinidad
• Ms Tessa Lorimer, Special Counsel, Withers LLP and formerly of the Crown Prosecution Service for England and Wales and the HM Revenue and Customs Prosecution Office, UK
William Byrnes has established a Curriculum in Risk Management
The Internal Revenue Service today announced that the Summer 2017 Statistics of Income Bulletin is available on IRS.gov. The
Statistics of Income (SOI) Division produces the online Bulletin quarterly, providing the most recent data available from various tax and information returns filed by U.S. taxpayers. This issue includes articles on the following topics:
- High-Income Tax Returns, Tax Year 2014– For tax year 2014, there were almost 6.3 million individual income tax returns with incomes of $200,000 or more, accounting for 4.2 percent of all returns for the year, up from 5.6 million returns for tax year 2013.
- Corporate Foreign Tax Credit Study, Tax Year 2013– For tax year 2013, some 6,542 corporations filing corporation income tax returns reported more than $118 billion in foreign tax credits. Firms in manufacturing industries accounted for 58 percent of all foreign tax credits. European countries accounted for 39.3 percent of taxable foreign-source income and 46 percent of current year foreign taxes.
- Individual Noncash Contributions, Tax Year 2014– The number of individuals filing Form 8283 to claim a noncash charitable contribution rose to 8 million for tax year 2014, an increase of 3.9 percent over tax year 2013. Total donations reported increased 30.1 percent for 2014 to $60.4 billion. Of this total, more than half went to foundations ($18.9 billion) and large charitable organizations ($12.2 billion).
SOI Bulletin articles are available for download at IRS.gov/statistics.
Monday, September 11, 2017
Inside This Issue
- State Data, Tax Year 2015
- Metropolitan and Micropolitan Data, Tax Year 2015
- County Data, Tax Year 2015
- ZIP Code Data, Tax Year 2015
- Mid-July Filing Season Statistics by Adjusted Gross Income
State data tables for Tax Year 2015 are now available on SOI’s Tax Stats Web page. These tables present selected income and tax return items from individual income tax returns (Form 1040) broken out by all 50 states, as well as the District of Columbia and other areas. Notable changes to the data this year include the addition of volunteered income tax assistance (VITA) returns with Earned Income Credit as well as three number-of-return variables: refund anticipation loan returns; refund anticipation check returns; and elderly returns.
Metropolitan and Micropolitan data tables for Tax Year 2015 are now available on SOI's Tax Stats Web site. These tables present selected income and tax return items based on SOI's county data. The information provides for more indepth analysis as it contains urban core populations of 50,000 or more for metro areas and at least 10,000 (but less than 50,000) for micro areas. Notable changes to the data this year include the addition of volunteered income tax assistance (VITA) returns with Earned Income Credit as well as three number-of-return variables: refund anticipation loan returns; refund anticipation check returns; and elderly returns.
Tables by county from selected income and tax return items for Tax Year 2015 are now available on SOI’s Tax Stats Web page. These tables present data from individual income tax returns (Form 1040) broken out by county-level geography for approximately 3,000 counties across the United States. Notable changes to the data this year include the addition of volunteered income tax assistance (VITA) returns with Earned Income Credit as well as three number-of-return variables: refund anticipation loan returns; refund anticipation check returns; and elderly returns.
ZIP code data tables for Tax Year 2015 are now available on SOI’s Tax Stats Web page. These tables present selected income and tax return items from individual income tax returns (Form 1040) by ZIP-code level geography for approximately 43,000 ZIP codes across the United States. Notable changes to the data this year include the addition of volunteered income tax assistance (VITA) returns with Earned Income Credit as well as three number-of-return variables: refund anticipation loan returns; refund anticipation check returns; and elderly returns.
Tables presenting information by AGI from the population of all Forms 1040 processed by the IRS on or before week 30 of the calendar year are now available on SOI’s Tax Stats Web page. These returns primarily reflect income earned in the year preceding the filing year, but exclude taxpayers who requested a 6-month extension by filing Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return.
Wednesday, August 23, 2017
It is end of summer which means the 71st annual IFA is upon us. 2,500 international tax academics, general counsel of Fortune 500, government, IGOs, and big firm partners gather for over a week in this scientific forum to investigate the tax challenges that cause friction for international trade and investment, as well as the challenges for governments to legislate and collect tax to fulfill expenditure requirements.
IFA 2017 Global Conference : 71st Congress of the International Fiscal Association will be held from Sunday, 27 August 2017 to Friday, 1 September 2017 (most of us arrive to the conference this Thursday to begin discussions so I look forward to meeting you this weekend at the lobby or in the convention center!)
The Future of Transfer Pricing
Although optimists agree that the future world will be unique, most of them tend to disagree how to achieve it. In this sense, regarding transfer pricing issues, many proposals of reform are being elaborated or even implemented to solve the current problems, not only limited to BEPS actions. In order to discuss the future of transfer pricing, the panel will present and debate (i) the foundations and problems of the current regime, (ii) the recent developments that such paradigms have brought in terms of transfer pricing methods as well as (iii) the main practical problems under debate and (iv) the divergent proposals within different jurisdictions to solve them.
Assessing BEPS: Origins, Standards and Responses
The G20/OECD Base Erosion and Profit Shifting (“BEPS”) initiative, aiming at “fixing” the international tax system on the basis of coherence, substance and transparency, is currently implemented around the globe. Relying on latest developments, Subject 1 will provide participants with an instigating comparative analysis of the implementation of BEPS in various regions. The discussion will begin in the internal market and will look at the impact of BEPS for European Member States and their relations with third countries. The relation and consistency of BEPS with European law and developments such as the (re)evolution of state aid rules shall also be considered from a policy perspective. Next, the panel will contrast the national responses to BEPS in different jurisdictions, looking in particular at the US, Latin American countries, India and the Asian region. In the end, the panel will assess whether the BEPS project has kept its promises and will formulate recommendations for future multilateral initiatives.
International Fiscal Association
The International Fiscal Association (IFA) was established in 1938 with its headquarters in the Netherlands. It is the only non-governmental and non-sectoral international organisation dealing with fiscal matters. Its objects are the study and advancement of international and comparative law in regard to public finance, specifically international and comparative fiscal law and the financial and economic aspects of taxation. IFA seeks to achieve these objects through its Annual Congresses and the scientific publications relating thereto as well as through scientific research. Although the operations of the IFA are essentially scientific in character, the subjects selected take account of current fiscal developments and changes in local legislation.
Membership of IFA now stands at more than 12,500 from 116 countries. In 70 countries IFA members have established IFA Branches. Direct membership is possible in countries where there is as yet no IFA Branch. Please visit the IFA website (www.ifa.nl) on which a survey is posted which gives an impression of the geographical spread of the members affiliated to the IFA Branches and a survey of the direct members.
Friday, July 28, 2017
What is the Foreign Recipients of U.S. Income Study?
Withholding Agents who pay U.S.-source income to nonresident aliens and other foreign persons are required to report this income on Form 1042-S, Foreign Persons' U.S.- Source Income Subject to Withholding. This income is subject to a flat, statutory tax rate of 30 percent. However, this rate is frequently reduced or eliminated by an income tax treaty or statutory exemption. Income that is exempt from taxation because of a tax treaty or certain other exemptions must still be reported. U.S. individuals, corporations, or other entities paying U.S.-source income to foreign persons are required to withhold taxes on this income (except where statutory or treaty exemptions apply) or to appoint a withholding agent (normally a U.S. financial institution) to do so. Foreign financial institutions that enter into an agreement with the Internal Revenue Service, known as qualified intermediaries (QIs), may also serve as withholding agents. A withholding agent or qualified intermediary is fully liable for all taxes owed by a foreign beneficial owner and also reports the income paid to each recipient on a Form 1042S. Without this withholding requirement, there would be no effective way to enforce taxpayer compliance because foreign recipients are generally not required to file U.S. tax returns to report this income.
For information about selected terms and concepts and a description of the data sources and limitations, please visit Foreign Recipients of U.S. Income Metadata.
Forms 1042-S: Number, Total U.S.-Source Income, and U.S. Tax Withheld
Shown by tax treaty countries and total non-tax treaty countries.
Forms 1042-S: Number, U.S. Tax Withheld, and U.S.-Source Income
Shown by principal type of income, selected recipient type, and selected country of recipient.
Forms 8288-A: Number, Sales Price, and U.S. Tax Withheld
Shown by selected country of the seller.
Thursday, July 27, 2017
Eaton and the IRS entered into two advance pricing agreements (APAs) establishing a transfer pricing methodology for covered transactions between Eaton and its subsidiaries. The first APA (APA I) applied for Eaton’s 2001-05 tax years, and the second APA (APA II) applied for Eaton'’s 2006-10 tax years. Eaton and the IRS agreed that the legal effect and administration of APA I and APA II were governed by Rev. Proc. 96- 53, 1996-2 C.B. 375, and Rev. Proc. 2004-40, 2004-2 C.B. 50, respectively.
In 2011 the IRS determined that Eaton had not complied with the applicable terms of the revenue procedures and canceled APA I, effective January 1, 2005, and APA II, effective January 1, 2006. As a result of canceling the APAs, the IRS determined that under I.R.C. sec. 482 an adjustment was necessary to reflect an arm’s-length result for Eaton’s intercompany transactions.
In its petition to the Tax Court, Eaton acknowledged that certain errors existed in the data used to calculate the results under the TPM for both of the APAs, but emphasized that it identified the errors, immediately disclosed them to the IRS, took appropriate measures to correct the errors, and submitted amended APA annual reports that reflected the changes made to fix the data errors. The Commissioner’s Answer, which the IRS filed on May 7, 2012, responded by stating examples of alleged material deficiencies in APA compliance, including noncompliance with the terms and conditions of the APA, errors in supporting data and computations used in the transfer pricing methodologies, lack of consistency in the application of the TPMs, use of distortive accounting, material facts being misrepresented, mistakenly presented, or not presented in submissions, discrepancies between the transfer pricing reported by Eaton in its APA Annual Reports and the transfer pricing reflected on its books and tax returns, and the failure to explain relevant book-tax differences and schedule M adjustments.
Eaton contends that the IRS’s cancellation of APA I and APA II was an abuse of discretion because there was no basis for the cancellation under the applicable revenue procedures. The IRS contends that the determination to cancel both APA I and APA II was not an abuse of discretion because Eaton did not comply in good faith with the terms and conditions of either APA I or APA II and failed to satisfy the APA annual reporting requirements. As an alternative position, IRS determined that Eaton transferred intangible property compensable under I.R.C. sec. 367(d) to Eaton's’s controlled foreign affiliates for tax year 2006.
Held (202 page decision): The IRS's determination to cancel APA I and APA II was an abuse of discretion. Held, further, Eaton did not transfer intangibles subject to I.R.C. sec. 367(d). Held, further, Eaton’s bonus payments represented employee compensation, entitling Eaton to a deduction under I.R.C. sec. 162(a).
For an in-depth analysis, see the forthcoming supplement of William Byrnes, Practical Guide to U.S. Transfer Pricing (available on Lexis Advance).
Friday, July 14, 2017
Partnerships, Withholding on Foreign Recipients of U.S. Income, Tax Year 2014—One new table presenting data from Form 8805, Foreign Partner's Information Statement of Section 1446 Withholding Tax, is now available on SOI’s Tax Stats Web page. The table provides U.S. income and tax withheld as reported on Form 8805, by country of residence for Tax Year 2014, and includes the number of returns, total income, income, loss, and tax withheld.
Thursday, July 13, 2017
French Court Finds Google Does Not Have a French Permanent Establishment. Spares $1.2 Billion Tax Bill.
La société irlandaise Google Ireland Limited (GIL), filiale du groupe américain Google Inc., commercialise, en France notamment, un service payant d’insertion d’annonces publicitaires en ligne, « AdWords », corrélé au moteur de recherche Google.
La société française Google France (GF), également contrôlée par Google Inc., fournit, aux termes d’un contrat conclu avec GIL, assistance commerciale et conseil à la clientèle française de GIL, constituée d’annonceurs ayant souscrit à son service « AdWords ».
La société GIL contestait les redressements fiscaux dont elle avait fait l’objet en matière d’impôt sur les sociétés, retenue à la source, TVA, cotisation minimale de taxe professionnelle et cotisation sur la valeur ajoutée des entreprises, à raison des prestations de publicité qu’elle facture à ses clients français.
Le tribunal administratif a donné raison à la société GIL en prononçant la décharge des impositions contestées.
S’agissant de l’impôt sur les sociétés et de la retenue à la source, l’administration fiscale s’était fondée sur l’alinéa 9-c de l’article 2 de la convention fiscale franco-irlandaise qui prévoit l’imposition en cas de présence d’un établissement stable en France. Le tribunal a jugé que GIL ne disposait pas en France, en la personne morale de GF, d’un tel établissement stable. En effet, l’existence d’un tel établissement stable est subordonnée à deux conditions cumulatives : la dépendance de GF vis-à-vis de GIL et le pouvoir de GF d’engager juridiquement GIL. Or, le tribunal a estimé que GF ne pouvait engager juridiquement GIL car les salariés de GF ne pouvaient procéder eux-mêmes à la mise en ligne des annonces publicitaires commandées par les clients français, toute commande devant en dernier ressort faire l’objet d’une validation de GIL.
S’agissant de la TVA, la jurisprudence communautaire soumet l’imposition à l’existence d’une structure apte, du point de vue de l'équipement humain et technique, à réaliser des prestations de manière autonome. Le tribunal a jugé que tel n’était pas le cas de GF, qui ne disposait ni des moyens humains (le personnel de GF n’a pas le pouvoir de mettre en ligne les annonces publicitaires commandées par les clients français), ni des moyens techniques (absence, notamment, de serveurs en France) la rendant à même de réaliser les prestations de publicité en cause.
S’agissant de la cotisation minimale de taxe professionnelle et de la cotisation sur la valeur ajoutée des entreprises, le tribunal a jugé que GIL ne disposait en France d’aucune immobilisation corporelle placée sous son contrôle, utilisable matériellement pour la réalisation des prestations de publicité litigieuses. Il a, en effet, estimé que les locaux de GF étaient utilisés pour les besoins de sa propre activité d’assistance et de conseil et que son matériel informatique ne permettait pas à lui seul la réalisation des prestations publicitaires de GIL en France.
French Revenue Official Statement: Download French Revenue Authority statement
- Download 1505113 RS
- Download 1505126 CVAE
- Download 1505147 CMTP
- Download 1505165 TVA
- Download 1505178 IS
High-Income Tax Returns, Tax Year 2014—This annual study provides detailed data on returns with adjusted gross income or expanded income greater than $200,000. The study also looks at high-income, nontaxable returns (HINTs) and the reason for nontaxability. For Tax Year 2014, there were almost 6.3 million individual income tax returns with an expanded income of $200,000 or more, accounting for 4.2 percent of all returns for the year. Of these returns, 9,692 had no worldwide income tax liability. This was a 24.2-percent decline from the number of returns with no worldwide income tax liability in 2013, and the fifth decrease in a row since the all-time high of 19,551 HINTs in 2009.
Tuesday, July 11, 2017
The Electronic Tax Administration Advisory Committee (ETAAC) today held its annual public meeting and released its annual report to the IRS and the Congress, which includes numerous recommendations on improving electronic security in the tax system and fighting tax fraud related to identity theft.
The report marks the first year during which the ETAAC has turned its attention to efforts undertaken by the Security Summit -- an unprecedented undertaking by the IRS and its partners in state tax administration and the private sector.
"The ETAAC’s report builds on the significant, ongoing work by the IRS, the states and our private sector partners to protect the entire tax system," IRS Commissioner John Koskinen said. "We greatly appreciate the contributions of the Committee’s members to the production of this detailed report. The IRS will be reviewing the report’s recommendations, which will help us continue to make improvements in our fight against identity theft and refund fraud."
The ETAAC is an organized public forum, chartered by the Congress, for discussion of electronic tax administration issues such as prevention of identity theft and refund fraud in support of the overriding goal that paperless filing should be the preferred and most convenient method of filing tax and information returns.
ETAAC members represent various segments of the tax community including tax practitioners and preparers, consumer advocates, state governments and tax software developers.
Friday, July 7, 2017
Treasury Publishes List of 8 Regulations That Should be Withdrawn or Modified As Excessive and Burdensome, Following Trumps Executive Order To Reduce Regulatory Burdens
On April 21, 2017, President Donald J. Trump issued Executive Order 13789, a directive designed to reduce tax regulatory burdens. The order instructed the Secretary of the Treasury to review all “significant tax regulations” issued on or after January 1, 2016, and submit two reports, followed promptly by concrete action to alleviate the burdens of regulations that meet criteria outlined in the order.
From January 1, 2016, through April 21, 2017, Treasury and the IRS issued 105 temporary, proposed, and final regulations.3 During this time period, Treasury and the IRS issued one regulation—under Section 385 of the Internal Revenue Code—that the Office of Management and Budget designated as significant pursuant to Executive Order 12866.
Fifty-three of the 105 regulations issued during the relevant review period are minor or technical in nature and generated minimal public comment. To ensure a comprehensive review, Treasury treated the remaining 52 regulations as potentially significant and reexamined all of them for the purpose of formulating the interim report. Based on that reexamination, Treasury has identified regulations that meet the criteria of the President’s order and qualify as significant in view of the Presidential priorities for tax regulation outlined in Executive Order 13789.
- Proposed Regulations under Section 103 on Definition of Political Subdivision (REG-129067-15; 81 F.R. 8870)
- Temporary Regulations under Section 337(d) on Certain Transfers of Property to Regulated Investment Companies (RICs) and Real Estate Investment Trusts (REITs) (T.D. 9770; 81 F.R. 36793)
- Final Regulations under Section 7602 on the Participation of a Person Described in Section 6103(n) in a Summons Interview (T.D. 9778; 81 F.R. 45409)
- Proposed Regulations under Section 2704 on Restrictions on Liquidation of an Interest for Estate, Gift and Generation-Skipping Transfer Taxes (REG-163113-02; 81 F.R. 51413)
- Temporary Regulations under Section 752 on Liabilities Recognized as Recourse Partnership Liabilities (T.D. 9788; 81 F.R. 69282)
- Final and Temporary Regulations under Section 385 on the Treatment of Certain Interests in Corporations as Stock or Indebtedness (T.D. 9790; 81 F.R. 72858)
- Final Regulations under Section 987 on Income and Currency Gain or Loss With Respect to a Section 987 Qualified Business Unit (T.D. 9794; 81 F.R. 88806)
- Final Regulations under Section 367 on the Treatment of Certain Transfers of Property to Foreign Corporations (T.D. 9803; 81 F.R. 91012)
Friday, June 30, 2017
The Offshore Voluntary Disclosure (OVD) Programs Still Lack Transparency, Violating the Right to Be Informed.
Excerpted from the 2018 Objectives Report to Congress ....
Beginning in 2009, the IRS established a series of Offshore Voluntary Disclosure Programs (OVDPs), which allow certain people who have not reported all of their foreign assets and income to settle with the IRS by paying taxes, interest, penalties, plus a “miscellaneous offshore penalty” (MOP). It also established a “streamlined” program for those who could certify their violations were not willful. These programs are governed by frequently asked questions (FAQs) posted on the IRS website. The Large Business and International (LB&I) Division Withholding and International Individual Compliance (WIIC) Director can approve minor changes to the FAQs, but the Commissioner or Deputy Commissioner must approve significant ones. IRS examiners interpret the FAQs with assistance from technical advisors and Small Business/Self-Employed (SB/SE) Counsel. They may also access training materials and job aids posted to a secure SharePoint intranet site. Download JRC18_Volume1_AOF_03
The IRS Does Not Disclose Interpretations of OVDP Frequently Asked Questions (FAQs)
Chief Counsel Advice from (or coordinated with) national office attorneys must be disclosed under IRC § 6110. Other “instructions to staff ” that affect the public must be disclosed under the Freedom of Information Act (FOIA). However, the IRS does not disclose its interpretations of FAQs. For example, when the IRS first established the 2009 OVDP, it did not disclose how it interpreted FAQ #35, which addressed how to compute the “offshore penalty.” The guidance memo was only disclosed in response to a Taxpayer Advocate Directive. Practitioners have highlighted other undisclosed and counterintuitive FAQ interpretations.
While the IRS may be required to disclose FAQ interpretations under FOIA, it is generally not required to disclose legal advice regarding the OVDP FAQs under IRC § 6110. IRC § 6110 requires disclosure of certain advice provided by or coordinated with the national office, but legal advice concerning the interpretation of the FAQs is generally provided by an SB/SE attorney in the field who is an OVDP expert. Moreover, some of this advice may be privileged, even if it reveals principles that the IRS will apply in other cases.
The IRS could voluntarily disclose important interpretations of OVDP FAQs, but does not. For example, 2012 OVDP FAQ #10 is particularly important because, like 2009 FAQ #35, it concerns the amount taxpayers must agree to pay under the OVDP. FAQ #10 describes an “alternative mark-to-market” (MTM) method that OVDP participants can only use to file or amend returns inside the program. Under this method, participants are taxed on unrealized gains reduced by unrealized losses. Notably, FAQ #10 does not inform participants that they cannot offset unrealized gains with unrealized losses from years for which the refund statute expiration date (RSED) has passed. Rather, it implies the opposite by warning only that unused losses cannot be carried forward beyond the OVDP disclosure period. If unrealized losses can be claimed for some years during this period and not others (i.e., because the RSED has passed), it is misleading not to include that warning as well. Yet, that is how the IRS interprets FAQ #10 — as not permitting taxpayers to offset unrealized gains with losses from years for which the RSED had passed. Members of the Tax Section of the American Bar Association — who somehow learned of the IRS’s undisclosed interpretation of FAQ #10 — suggested that the IRS is not legally required to deny offsets from barred years and that doing so is unnecessarily punitive.
Although the IRS’s interpretation of FAQ #10 may be implied by IRS training materials, these training materials were not posted to the IRS website, as seemingly required by FOIA. Rather, a private firm acquired them by making a FOIA request and then made them available to the public on its private website. They are not indexed or organized. The firm could remove them or impose an access charge at any time. Moreover, neither the public nor other IRS employees (e.g., TAS employees) should have to search a private website for information about an IRS program.
More Routine Disclosure of Advice Would Be Helpful
In the years before the IRS was required to release its private letter rulings and other legal advice to the public, a 1926 report found that:
[R]ulings were known only to insiders … This system ha[d] created, as a favored class of taxpayers, those who ha[d] employed ‘tax experts.’ It ha[d] created a special class of tax practitioners, whose sole stock in trade [was] a knowledge of the secret methods and practices of the Income Tax Unit. Knowledge of secret precedents had made Bureau employees extremely valuable to corporate taxpayers, fostering a damaging rate of turnover. Only the regular publication of BIR [Bureau of Internal Revenue] decisions could halt this outflow and ensure equal treatment for all taxpayers.
While the IRS is more transparent today, a lack of transparency in connection with undisclosed FAQ interpretations could present the same risks. To assess those risks, TAS reviewed a sample of ten items of undisclosed advice about OVDP FAQs issued between March 1, 2016 and March 8, 2017. According to the IRS, these documents were not checked or reviewed by any disclosure expert to determine if they should be disclosed. However, TAS’s review uncovered information that could be helpful to taxpayers, such as following:
- When the MOP is assessed pursuant to a closing agreement, the tax year recited in the closing agreement is the tax year that controls the analysis of whether it is too late to issue a refund of the MOP (e., if the refund statute of limitation under IRC § 6511 has expired). The tax year recited in these agreements is generally the last tax year in the disclosure period.
- If a taxpayer makes a payment for the MOP and then is removed from or opts out of the OVDP, the statute of limitation under IRC § 6511 for all tax years in the OVDP submission must be analyzed in determining if it is too late to issue a refund. If the period is open for any tax year in the submission, then a claim for refund of the MOP may be considered under IRC § 6511.
- When determining if the taxpayer had less than $10,000 in U.S. source income, as necessary to qualify for the five percent penalty under 2012 OVDP FAQ #52, the IRS considers gross income (not net income). In limited circumstances where the taxpayer receives flow-through income from an entity not controlled by the taxpayer, however, the IRS may apply a cash flow analysis for purposes of determining if the taxpayer exceeds this $10,000 threshold.
- The IRS is legally permitted to consider an offer in compromise before there is an assessment pursuant to a closing agreement in the OVDP.
- A Swiss “libre passage” account is not excluded from the OVDP penalty base when computing the MOP on the basis that it is a tax-favored retirement account under Swiss law.
- OVDP Hotline personnel can assist taxpayers in determining whether a foreign retirement account (other than a Canadian retirement plan) must be included in the OVDP offshore penalty base by collecting information and elevating the matter to an OVDP Coordinator for consideration.
- OVDP Hotline personnel can assist taxpayers who have signed a Form 906 closing agreement and are due a refund if the examiner who handled the certification is unavailable to assist (g., has separated from service, is on maternity leave, etc.).
- OVDP Hotline personnel can assist taxpayers who erroneously omitted an account/asset from their original disclosure by collecting the information and elevating the taxpayer’s request to make a supplemental disclosure.
While taxpayers could glean some of this information from other sources (e.g., a representative with significant OVDP experience), disclosing answers to questions about the FAQs — whether by disclosing internal training and guides or advice currently being provided to IRS employees by email — could help taxpayers (and practitioners) understand the OVDP even if they are unrepresented, reduce unnecessary calls to the Hotline, increase confidence that the IRS is handling cases consistently, reduce internal requests for advice, and reduce unnecessary requests for assistance from TAS.
The IRS Does Not Always Disclose the Basis for Its OVDP-Related Decisions
When an OVDP examiner makes an OVDP-related decision based on guidance from a field attorney, technical advisor, or committee, he or she is not required to explain the resulting “take it or leave it” decision to the participant or allow the participant to speak with the decision maker. For example, the IRS announced in 2014 that certain OVDP participants could apply to transition into a more favorable “streamlined” program if they certified their conduct was non-willful. However, it would only allow them into the program if technical advisors, and in some cases, a secret “Central Review Committee”
agreed (i.e., taxpayers did not know who was on the committee and could not communicate with it). Participants would have no way to know if the examiner miscommunicated the facts to the technical advisor or to the committee, or what standards were being applied. Thus, a taxpayer had no way to know if the IRS’s decision in his or her case was consistent with its decisions in other similar cases.
The IRS Does Not Release Summary Statistics
The IRS’s release of certain statistics, such as the average or median tax, interest, and penalties paid inside and outside an OVDP could help assure taxpayers they are not being unfairly singled out and the programs are being administered in a rational manner. Both TAS and the Government Accountability Office have computed and publicly reported such statistics in the past. However, LB&I recently stated that TAS should not publish an update. LB&I computes OVDP results using a different methodology, which TAS has obtained and redacted (at LB&I’s request) in the Appendix below. LB&I explained:
Statistics with details beyond those publicly released in press releases by the Commissioner (most recently in IR-2016-137) may impair tax administration and are exempt from release under FOIA. LB&I’s response to FOIA request #————— from —————— ——— limited the information provided under the request to high level statistics. TAS should not release statistics more granular than those provided by the Commissioner in press releases.
We disagree. “May impair tax administration” is not the legal standard for withholding information under FOIA.26 Even if it were, the IRS has provided no basis to support its conclusion that releasing this data may impair tax administration. Moreover, if the IRS could prevent the National Taxpayer Advocate from publishing data more granular than data provided by the IRS Commissioner in press releases, her reports would be much less effective in highlighting problems, such as those caused by the IRS’s initial one-size-fits all approach to the OVDPs.
In addition to penalties assessed inside OVDP-related programs, the Treasury Department also compiles a summary of the penalties assessed outside the OVDPs against those who failed to file a Report of Foreign Bank and Financial Accounts (FBAR) for reports to Congress. However, the IRS has not disclosed this summary to the public, notwithstanding repeated requests by TAS. After years of working with the IRS to release these reports, the IRS recently stated for the first time to TAS that “Treasury is the owner of the annual FBAR report and thereby controls the release of that report.”
The IRS’s lack of transparency about how taxpayers fare inside and outside the OVDPs makes it more difficult for anyone to recognize when the result in a particular case is outside the norm. Moreover, this lack of transparency makes it impossible for impartial and independent observers to assess the effectiveness of the OVDPs.
According to a tax historian, “corruption, favoritism, secrecy, and taxpayer mistreatment” have prompted political leaders to try to restructure the IRS four times over the last 145 years. Given the IRS’s history, it may be easier for taxpayers to believe that if the agency is not transparent, it must have something to hide. The IRS and Congress’s recent adoption of the Taxpayer Bill of Rights (TBOR) could help restore faith in the agency.
However, secrecy in the OVDPs violates the TBOR. The TBOR provides that taxpayers “have the right to be informed of IRS decisions about their tax accounts and to receive clear explanations of the outcomes.” Blindsiding only those taxpayers who do not have special access to the IRS’s undisclosed interpretations of FAQs is inconsistent with this right, as well as the rights to quality service and to a fair and just tax system. Similarly, when the IRS does not provide for any appeal or review of “take it or leave it” offers (or even provide an explanation of them), it erodes the right to challenge the IRS’s position and be heard.
Transparency could also promote efficiency by reducing disputes. When the IRS’s lack of transparency makes people feel singled out for arbitrary and capricious treatment, they are more likely to try to elevate the IRS’s determinations, delaying resolution of their cases. Although the IRS does not disclose how long it takes to resolve OVDP cases, the Treasury Inspector General for Tax Administration recently reported “the IRS has taken nearly two years to complete 20,587 [OVDP] case certifications, with 241 cases taking at least four years to complete.” Some cases are probably delayed because participants feel they are being treated unfairly. Moreover, trust for the IRS is correlated with voluntary taxcompliance. Thus, additional transparency could help restore faith in the IRS, promote consistent results, speed case resolutions, and promote voluntary compliance.
FOCUS FOR FISCAL YEAR 2018
In Fiscal Year 2018, TAS will:
- Advocate for the IRS to disclose all of the OVDP-related rules and procedures it is following, along with any interpretations of them (g., the OVDP Hotline Guide, training materials, and IRS Counsel’s responses to questions about the OVDP FAQs), even if disclosure is not legally required;
- Advocate for the IRS to allow taxpayers to communicate directly with decision makers (g., OVDP Technical Advisors and the Central Review Committee) to verify that they have considered all of the relevant facts, and can articulate a reasonable basis for their decisions; and
- Advocate for the IRS to disclose detailed summary statistics for the OVDP and streamlined programs (g., the FBAR report to Congress and the OVDP Closed Case Reports) to help taxpayers determine if they are being treated like everyone else and to help stakeholders evaluate these programs.
Sunday, June 11, 2017
The FATCA FFI Registration system has been updated to include the ability for FFIs to renew their agreement with the IRS. From the home page link of “Renew FFI Agreement,” the FI will determine whether it must renew its FFI agreement. A table of guidelines is provided to assist in this determination. Once the determination is made, the system enables an FI to review and edit their registration form. The FI will need to verify and update their registration information and submit to renew their FFI agreement.
Those who are required to renew their FFI agreement and do not by July 31, 2017, will be treated as having terminated their FFI agreement as of January 1, 2017, and may be removed from the FFI List.
All FIs should login to the system for this determination. For login assistance, review the FATCA FFI Registration system FAQ's.
The table below provides a general overview of the types of entities that are required to renew their FFI agreement.
Renewal of FFI Agreement
Financial Institution’s FATCA Classification in its Country/ Jurisdiction of Tax Residence
Type of Entity
FFI Agreement Renewal Required?
Participating Financial Institution not covered by an IGA; or a Reporting Financial Institution under a Model 2 IGA
Participating FFI not covered by an IGA
Reporting Model 2 FFI
Registered Deemed-Compliant Financial Institution (including a Reporting Financial Institution under a Model 1 IGA)
Reporting Model 1 FFI operating branches outside of Model 1 jurisdictions
Yes, on behalf of branches operating outside of Model 1 jurisdictions (other than related branches)
Reporting Model 1 FFI that is not operating branches outside of Model 1 jurisdictions;
Registered deemed-compliant FFI (regardless of location)
None of the above
Direct reporting NFFE
Trustee of Trustee-Documented Trust
The system update includes Renewal of FFI Agreement fields and information on account home pages and the lead's view of member pages. These fields include:
- FI Renewal of Agreement Due Date
- Renewal of Agreement Submitted Date
- Renewal Status
The system will notify all approved financial institutions of the renewal open period and due date to renew the FFI agreement. The due date for all renewals is July 31, 2017.
The system instructions and online help are updated for the Renewal of FFI Agreement. The FATCA Registration User Guide is also updated to include steps for FIs to renew their FFI agreement.
Along with system fixes, the update within the registration application includes the removal of the classification of limited for FIs and FI branches. This classification option will no longer be available for new FI applicants or for renewing FIs.
Two other changes in this release are the inclusion of a warning banner and the attempts to unsuccessfully login is now reduced to three.
Monday, June 5, 2017
The Internal Revenue Service announced that the Spring 2017 Statistics of Income Bulletin is now available on IRS.gov. The Statistics of Income (SOI) Division produces the online Bulletin quarterly, providing the most recent data available from various tax and information returns filed by U.S. taxpayers. This issue includes articles on the following topics:
• Individual Income Tax Returns, Preliminary Data, Tax Year 2015: For tax year 2015, taxpayers filed almost 151 million U.S. individual income tax returns, slightly more than were filed for the prior tax year. In tax year 2015, adjusted gross income rose 5 percent compared to the prior year, representing increases in salaries and wages, partnership income and distributions from retirement plans, among other income items.
• Individual Income Tax Shares, Tax Year 2014 provides details from income tax returns filed for tax year 2014. The average adjusted gross income (AGI) reported on these returns was $69,565, up 6.5 percent from the previous year. Total AGI increased 7.5 percent to $9.71 trillion.
Tuesday, May 30, 2017
On Wednesday, a federal court in Minneapolis, Minnesota ruled that Wells Fargo is liable for a 20 percent negligence penalty in connection with $350 million of foreign tax credits that it claimed based on its participation in an abusive tax shelter known as Structured Trust Advantaged Repackaged Securities (STARS). This follows a Minnesota jury’s verdict on Nov. 17, 2016, that ruled Wells Fargo was not entitled to those foreign tax credits because the transaction lacked both economic substance and a non-tax business purpose.
After a three-week trial, the jury in this case was asked to determine whether Wells Fargo’s STARS transaction had economic substance, and the jury made some key factual findings. Wells Fargo contended that STARS was a single, integrated transaction that resulted in low-cost funding, but the jury found that in reality, the transaction consisted of two economically distinct and independent transactions: a loan and a trust. The jury found that the trust structure had no reasonable potential for pretax profit and that Wells Fargo entered into the trust structure solely for tax reasons. The jury also found that Wells Fargo entered into the loan solely for tax-related reasons.
In a prior decision in this case, the court noted that Barclays Bank PLC marketed the STARS transaction to American banks, which was designed to exploit differences between the tax laws in the United States and in the United Kingdom. Three other courts have rejected STARS tax shelters that Bank of New York, BB&T Bank and Santander Bank purchased. Santander Holdings USA, Inc. v. United States, 844 F.3d 15 (1st Cir. 2016), pet. for cert. filed, March 20, 2017 (No. 16‐1130); Bank of N.Y. Mellon Corp. v. Comm’r, 801 F.3d 104 (2d Cir. 2015), cert. denied, 136 S. Ct. 1377 (2016); Salem Fin., Inc. v. United States, 786 F.3d 932 (Fed. Cir. 2015), cert. denied, 136 S. Ct. 1366 (2016).
“The jury verdict is a resounding message to companies trying to exploit an abusive transaction that no matter how sophisticated the scheme, these sham tax shelters will not stand,” said Acting Assistant Attorney General David A. Hubbert of the Justice Department’s Tax Division. “The Court’s opinion is equally clear that taxpayers who engage in such transactions can be subject to significant penalties.”